Reactivation of fetal hemoglobin production is an important treatment strategy for sickle cell anemia and thalassemia. Differentiating erythroid progenitor cells and mature erythrocytes in the bone marrow are found in close proximity to vascular structures with early progenitor cells localized more distally, allowing for variation in oxygen tension in the microenvironment. We found that oxygen tension affects transcription factor expression in CD34+ hematopoietic progenitor cells stimulated by erythropoietin (EPO). EPO induction of GATA-1, Tal1/SCL and EKLF is markedly reduced with a typical delay in peak expression in cultures at low oxygen tension. GATA-2 was greatest prior to EPO stimulation and its down-regulation by EPO was not markedly affected by hypoxia. Concomitant with the modification in transcription factor expression were increases in gamma-globin, decreases in beta-globin gene expression and over-all increases % fetal hemoglobin. The greatest increases appeared at 5% oxygen with minimal changes in erythroid differentiation. The increase in % fetal hemoglobin can be attributed to both a delay and reduction in the expression of transcription factors that are needed for beta-globin induction, particularly EKLF, as well as a direct increase in gamma-globin gene expression. These data suggest that that induction of gamma-globin at low oxygen tension cannot be accounted for by activation of GATA-1 or Tal1/SCL transcription factors. Rather, the low levels of GATA-1 and Tal1/SCL observed at hypoxia appear to favor gamma-globin expression. During early differentiation of human adult erythroid progenitor cells we found expression of embryonic globin and SATB1, a matrix attachment region binding protein. We identified SATB1 binding sites in the locus control region and embryonic epsilon-globin gene in the beta-globin cluster. SATB1 increased associated histone acetylation in these regions and increased corresponding transcription activation. SATB1 formed a complex with CREB-binding protein (CBP) and SATB1 activation of transcription was amplified by CBP. These findings expand the regulatory mechanisms of globin gene activation to include SATB1 contributing to early erythroid differentiation by direct interaction within the beta-globin cluster.